What is a CIBIL Score?
The CIBIL score is a three-digit number that determines your creditworthiness. Essentially, it is calculated by your financial habits and credit repayment patterns. The CIBIL score range is between 300 and 900. Usually, it is recommended to maintain a CIBIL score above 750. This score provides information about all of your financial transactions. This scoring technique is very effective as it provides a deep understanding of an individual’s credit repayment habits. Due to this reason, many banks, and financial institutions use the CIBIL score as part of the screening process before providing credit to an applicant.
Importance of CIBIL Score
Check CIBIL score often as it is of great importance. It is not only important for you, but it is also important for the banks or financial institutions in case they have to lend you credit. Let us have a look at the 3 main reasons why a CIBIL score is important.
- It Helps Understand Your Credit Status
You can gain a clear understanding of where you stand in your credit journey. It is always recommended to have a credit score above 750. The CIBIL score helps the borrower understand your credit status as well. By gaining a picture of your credit status, the banks and lending institutions can understand your creditworthiness. This helps banks from understanding the risks of lending credit.
- Helps Decide Interest Rates
By knowing your CIBIl score, the banks and lending institutions can determine the interest rate that they can offer. Having a higher CIBIL score (preferably above 750) can fetch you a lower interest rate. On the other hand, having a low CIBIL score can lead to higher interest rates as a lower score translates to lower creditworthiness.
- Helps Decide Approval Limits
The higher your CIBIL score, the higher your credit approval limit. A high CIBIL score is an indicator of disciplined and reliant repayment habits. Hence, banks and financial institutions will be more comfortable lending a higher credit amount to applicants with a high CIBIL score.
Tips to Improve your CIBIL Score
Here are some tips to boost your credit score and ensure good financial repayment habits.
- Repay all of your pending credit dues.
- To create a proper track record, pay your EMIs on time.
- If you do not use your credit card, return them, Dormant credit cards do not boost your credit score.
- If your application for a credit card has been declined, avoid re-applying soon after.
- While choosing a repayment tenure, choose a long tenure so that you can make par-prepayments and boost your CIBIL score.
- Repay a huge debt to substantially increase your CIBIL score.
In a Nutshell
CIBIL score is very important and is a reflection of your credit repayment habits. There are several benefits that come along with a high credit score. You can avail of more credit limits in a hassle-free manner. In addition, your loan disbursal process will also be processed quickly. You can check your CIBIL score through Finserv MARKETS and ensure that you have a good credit score.